A Metra conductor signals for all clear at the Metra Arlington Heights station Thursday, Sept. 15, ... [+] 2022, in Arlington Heights, Ill. President Joe Biden said Thursday a tentative railway labor agreement has been reached, averting a potentially devastating strike before the pivotal midterm elections. (AP Photo/Nam Y. Huh)

The news about the proposed deal to avert a rail strike was big. That’s because a rail strike would have been bigger. Railroads transportation account for about 28% of freight transportation in the U.S., according to the Federal Railroad Administration.

“Rail is a cost-effective and efficient way to move almost any freight in the United States, which benefits both producers and consumers,” the agency says. “Each American requires the movement of approximately 54 tons of freight per year. Goods people use or components of the goods people use are largely shipped by rail.”

If you think that supply chain problems were bad before, they would have gotten significantly worse had rail-bound freight transportation been shut down.

Workers haven’t agreed to the new contract yet. If they do accept the announced deal, “workers whose pay had been frozen would win double-digit increases and would be allowed to seek certain types of medical care without fear of being punished, union leaders said,” according to a Reuters report. “The agreement also includes an immediate 14.1% wage rise.”

But they still might not, especially with 12 different unions having to sign off. “Leaders of the 12 unions involved in the talks must now sell agreements to members, who will vote to ratify or reject them over the next several weeks,” Reuters wrote. “And if Wednesday's rejection of the agreement by one of the smaller unions and complaints online by numerous union members are any guide, this won't be an easy sell.”

Many of the union members are deeply angry. Money is one issue, but apparently “the real holdup in the talks had revolved around attendance, sick time and scheduling issues.”

I had never realized how brutal on the body railroad work can be until I met someone a few years back who had retired from the industry because of the injuries he had sustained. In difficult physical jobs—and I’ve done my share of hard blue-collar work (and injuries) in the past—there has to be time to get needed treatment. Time for recovery.

But even these other factors come down to money and what corporations are willing to spend. Often, you’ll hear a company cry poor. In some industries, businesses do work on short margins. But in many they don’t. Like in railways.

A trade publication, the American Journal of Transportation, ran an article claiming that railroads were the most profitable industry in the U.S., with average margins of 50%. Half of revenues going into profits.

The source of the data was an online site that calls itself the “small business advice platform.” Its post in question mentioned “recent research has now revealed the profit margins” for many industries.

Perhaps. But for a more practiced hand at this type of analysis, instead move over to the site of Aswath Damodaran, a professor who teaches corporate finance and valuation at the Stern School of Business at New York University. He periodically updates his running analysis of corporate margins by industry. It offers a fascinating look at who’s really in the money. His results show that the railroad segment of transportation has an average net margin—"profitability, after all expenses and taxes, accruing to stockholders in the firm”—of 28.9%.

For perspective, the median value for all industries is 7.9%. The heights the railroad industry reaches are the fifth highest of any industry, only exceeded by money center banks (the really big ones), non-bank financial services, regional banks, and entertainment software.

There are different ways to look at company profits. Another important one that Damodaran tracks is “pre-tax, pre-stock compensation operating margin.” In other words, before the company pays taxes or ladles out helpings of stock to employees (probably mostly executives). It shows how much money the company is throwing off before paying executives and governments their due. It’s after paying for parts and products, worker pay, offices, lawyers and accountants, travel, and so forth. This is a measure of who’s really pulling in the money far and beyond expenses.

From that view, tobacco is at the top at 44.7%. And second highest? Railroads with their 42.4%.

Take BNSF Railway Company, owned by Berkshire Hathaway BRK.B and its CEO, Warren Buffett. Last year, its revenue was $22.5 billion, according to data from S&P Global Market Intelligence. Profits before taxes were $9.3 billion, or 41%.

Or CSX CSX Corp., which had 2021 revenue of $12.5 billion and profits before taxes of about $5 billion, which is 40%.

These are money printing presses on steel wheels. That's why Warren Buffett is so heavily into rail.

It once was true that companies gave a much bigger part of increased profits to workers, because those people made the profits possible. By the 1980s, that was passé.

Executives, egged on by the likes of the Chicago School of Economics and hangers-on of Ayn Rand, thought they were the motivating force behind success, and that shareholders (and execs) should get the overwhelming benefits from increased profits.

It’s time to move back and become aware of who makes all those profits possible.